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Comparisons of utility inequality and income inequality

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  • Mathews, Timothy
  • Schwartz, Jesse A.

Abstract

A simple theoretical model is developed and analyzed to investigate the possible relationships between income inequality and utility inequality. Measuring utility inequality and income inequality with Gini coefficients, it is argued that there need not be any relation whatsoever between the realized levels of inequality in these two distinct outcomes. That is, a high level of income inequality could result when there is either equally high or absolutely no utility inequality, and a low level of income inequality could result when there is either no utility inequality or a relatively high degree of utility inequality. Consequently, if what we are actually concerned with is inequality in utility or well-being, observations on income inequality might be meaningless.

Suggested Citation

  • Mathews, Timothy & Schwartz, Jesse A., 2019. "Comparisons of utility inequality and income inequality," Economics Letters, Elsevier, vol. 178(C), pages 18-20.
    • Handle: RePEc:eee:ecolet:v:178:y:2019:i:c:p:18-20
    DOI: 10.1016/j.econlet.2019.02.015
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    References listed on IDEAS

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    3. Néstor Gandelman & Rafael Porzecanski, 2013. "Happiness Inequality: How Much is Reasonable?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 110(1), pages 257-269, January.
    4. Muller, Christophe & Trannoy, Alain, 2012. "Multidimensional inequality comparisons: A compensation perspective," Journal of Economic Theory, Elsevier, vol. 147(4), pages 1427-1449.
    5. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
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    More about this item

    Keywords

    Income inequality; Utility inequality;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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